MARKUP OF THE SMALL BUSINESS

ADMINISTRATION FISCAL YEAR 2012 BUDGET

HEARING
BEFORE THE

COMMITTEE ON SMALL BUSINESS

UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION

MARKUP HELD
MARCH 15, 2011

Small Business Committee Document Number 112005

Available via the GPO Website: http://www.fdsys.gov

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WASHINGTON

2011

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HOUSE COMMITTEE ON SMALL BUSINESS

SAM GRAVES, Missouri, Chairman
ROSCOE BARTLETT, Maryland
STEVE CHABOT, Ohio
STEVE KING, Iowa
MIKE COFFMAN, Colorado
MICK MULVANEY, South Carolina
SCOTT TIPTON, Colorado
CHUCK FLEISCHMANN, Tennessee
JEFF LANDRY, Louisiana
JAIME HERRERA BEUTLER, Washington
ALLEN WEST, Florida
RENEE ELLMERS, North Carolina
JOE WALSH, Illinois
LOU BARLETTA, Pennsylvania
RICHARD HANNA, New York
ZQUEZ, New York, Ranking Member
NYDIA VELA
KURT SCHRADER, Oregon
MARK CRITZ, Pennsylvania
JASON ALTMIRE, Pennsylvania
YVETTE CLARKE, New York
JUDY CHU, California
DAVID CICILLINE, Rhode Island
CEDRIC RICHMOND, Louisiana
GARY PETERS, Michigan
BILL OWENS, New York
BILL KEATING, Massachusetts

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LORI SALLEY, Staff Director

PAUL SASS, Deputy Staff Director
BARRY PINELES, General Counsel
MICHAEL DAY, Minority Staff Director

(II)

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CONTENTS
Opening Statements:
Graves, Hon. Sam .............................................................................................
Velazquez, Hon. Nydia M ................................................................................

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APPENDIX

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Views and Estimates of the Committee on Small Business on Matters to

be set forth in the Concurrent Resolution on the Budget for Fiscal Year
2012 .......................................................................................................................
Statements for the Record:
Cicilline, Hon. David N ....................................................................................
Clarke, Hon. Yvette D ......................................................................................
Chu, Hon. Judy .................................................................................................

(III)

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MARKUP OF THE SMALL BUSINESS

ADMINISTRATION FISCAL YEAR 2012 BUDGET

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TUESDAY, MARCH 15, 2011

HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
Washington, DC.
The Committee met, pursuant to call, at 1:34 p.m., in Room
2360, Rayburn House Office Building, Hon. Sam Graves [chairman
of the Committee] presiding.
Present: Representatives Graves, Coffman, Mulvaney, Tipton,
Fleischmann, West, Ellmers, Walsh, Barletta, Hanna, Velazquez,
Schrader, Altmire, Clarke, Cicilline, Owens, and Keating.
Chairman GRAVES. We will go ahead and call this markup to
order.
Two weeks ago, the Committee heard from Administrator Mills
about the Small Business Administrations budget for 2012. The
Committee now has the opportunity to provide its opinion on the
budget for the SBA. The Views and Estimates considered today will
be transmitted to Chairman Ryan for incorporation into the Congressional budget resolution.
The past few years have been very difficult for small businesses.
They have had their credit lines cut, they have lost customers, and
they have laid off workers. And these businesses have had to reduce their expenses, including overhead.
The federal government faces very similar constraints, and the
chasm of the deficit requires tough choices to be made. There appears to be no effort put forth by the Administration to eliminate
duplicative programs that are costing taxpayers millions of dollars.
The Views and Estimates before us cut nearly $100 million from
the SBA budget. Fourteen programs are defunded because they duplicate existing programs at the SBA or they are duplicated at
other agencies. Other programs receive no recommendations of
funds where there is an absence of any evidence that they are actually helping small businesses create new jobs.
Despite these cuts, the core functions of the SBAto make capital available, to provide advice, and to increase the utilization of
small businesses as federal government contractorsis preserved.
In fact, through some very judicious reallocation of funds, the services available to entrepreneurs will be improved over the SBA
budget proposal that was given to us.
The Committee recognizes the potential for fraud and abuse in
various SBA programs. And, as a result, the Views and Estimates
provide additional funds for modernizing the Loan Management
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Accounting System and the Office of Inspector General to address
those very concerns.
And, finally, but for the need to fund SBA guaranteed lending
programs, without which small businesses cannot obtain needed
capital to create jobs, the Views and Estimates under consideration
today represents a $155 million cut in the SBA budget request for
fiscal year 2010.
I now recognize the ranking member for opening remarks.
Ms. VELA ZQUEZ. Thank you, Mr. Chairman.
Todays consideration of the Committees Views and Estimates on
the SBA budget proposal could not be happening at a more critical
time. In recent months, it has become clear that the economy is
showing progress on many fronts; however, employment gains are
lagging. And it is in this respect that the SBA can play an important role.
Unfortunately, the SBA continues putting its own unauthorized
programs ahead of other proven initiatives. This includes seven initiatives, at a cost of more than $50 million. Yet, no performance
metrics accompany these sizeable requests. We all need to tighten
our belt, and it begins with proposals like this.
Just as the administration is creating its own programs outside
of the legislative process, it is defunding initiatives that have been
documented to have a pattern of success. The SBDC programs, for
instance, which saw its core budget cut by $10 million, produces
nearly $3 in Federal revenue for every $1 spent. It simply makes
no sense to divert money from reputable programs and give it to
the agencys untested projects.
The SBA also continues picking which programs to administer
and which to overlook. It sees fit to implement the 504 refinancing
and the intermediary pilot programs, even though they risk taxpayers dollars excessively and offer little in the way of meaningful
job creation. And over the past 5 years, the SBA has dumped millions into an ineffective IT system, the Loan Management Accounting System. But when it comes to other initiatives, such as the Increased Veterans Participation Program, which was passed into
law 3 years ago, the agency cannot find any money.
Little attention is also paid to solving SBAs most pressing problems, such as the ongoing fraud in its contracting and delegated
authority in the lending programs. If we are going to spend additional money, it should go toward cleaning up waste and abuse so
that the agencys existing programs actually work and help small
businesses.
With regard to the majoritys Views and Estimates letter, I support several provisions. The letter recommends the elimination of
several unauthorized pilot programs, as well as the questionable
initiatives created in the Small Business Jobs Act of 2010. It is correct to terminate those programs if they have not demonstrated
any value to the taxpayer.
However, there are several areas of concern. By proposing to
eliminate funding for the Veterans Business Outreach Center, it is
limiting the ability of the 190,000 veterans from Iraq and Afghanistan to launch their own businesses. Veterans who have a high
rate of entrepreneurship need more outreach, not less, regardless
of the cost. As we seek to tighten the SBAs belt, we should not be

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doing so at the expense of those who have already sacrificed so

much for our Nation. On this basis alone, Members should take
pause in adopting these views.
With regard to ending frivolous programs, we missed an opportunity to send a clear message on the administrations proposed
SBIC subprograms. The Views letter sent inconsistent signals by
first stating that funds should not be made available for these initiatives; then, it seemingly contradicts itself by stating that, if a
new program is created, the SBA should do so with a separate
credit subsidy rate. This gives the agency at least tacit approval to
go forward with this unauthorized project. As a result, the Views
are permitting the exact sort of wasteful spending that we are concerned with stopping.
I am concerned regarding all other wasteful unauthorized programs in any form, and we will make this clear in our Views.
As we all know, it is not uncommon to disagree on budget priorities. While the chairman and I may not fully agree on our Views,
I think it is clear that we are both disappointed in the agencys priorities. The inconsistency in its funding request is indicative of an
agency that needs to rethink its priorities.
Just as the recent downturn required entrepreneurs to think
more strategically, the SBA should be doing the same. What this
Committee needs to see is a refocusing on initiatives that have
positively impacted business owners while giving taxpayers a reasonable return on their investment.
With that, I yield back.
Chairman GRAVES. Thank you.
Are there any other Members who wish to be recognized for a
statement on the Views and Estimates?
Mr. Cicilline.
Mr. CICILLINE. Thank you, Mr. Chairman. I do have some remarks that I would like to, with unanimous consent, ask be included in the record.
Chairman GRAVES. Thank you very much. No objection, we will
include them in the record.
Any other Members wish to be heard?
The Committee now moves to the consideration of the Views and
Estimates letter.
The clerk will read the title of the document.
The CLERK. Views and Estimates of the Committee on Small
Business on matters to be set forth in the Concurrent Resolution
on the Budget for Fiscal Year 2012.

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Chairman GRAVES. I would ask unanimous consent that the

Views and Estimates letter be considered as read and open for
amendment in its entirety.
Does any Member seek recognition for the purpose of offering an
amendment?
Seeing none, the question is on adopting the Views and Estimates letter.
All those in favor, please say, Aye.
All those opposed, say, No.
The ayes appear to have it. It is the opinion of the chair that the
ayes do have it. The Views and Estimates letter is agreed to.
And I now recognize the ranking member for a motion.
Ms. VELA ZQUEZ. Yes, Mr. Chairman, I want to provide the Committee notice that Democrats will be filing separate Views with the
Committee on the Budget.
Chairman GRAVES. Without objection, so ordered.
And I would ask unanimous consent that the Committee be authorized to correct punctuation and make any other necessary technical changes in the document considered today.
And, without objection, that is so ordered.
I do want to, real quick, before we finish, welcome Mr. Hanna
from New York and Mr. Barletta from Pennsylvania to the Committee, our brand-new members. And I appreciate them being here
today.
And, with that, the hearing is adjourned. Thank you.
[Whereupon, at 1:44 p.m., the committee was adjourned.]

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